Compounding interest is a huge reward given to savers who start early. If you started saving for retirement late then you may be rightfully concerned when staring down the barrel of your retirement account balances. Whether you’re 15 years out from retirement, 10 years or even just five years, you can still take steps right now to significantly increase your savings and create a more secure financial future for your retirement years.
Here are four tips to help you stuff your retirement savings during the last few years before you stop working.
Step one: Reduce all discretionary spending
What’s worth more to you–going out to dinner and a movie once a month now, or being able to avoid financial disaster when you retire? It may seem extreme, but the discretionary spending you do right now is sabotaging your future. If you haven’t saved enough to give yourself a comfortable retirement, there’s no excuse; you simply must stop dining out, going to movies, shopping for non-necessities and so on. Instead, all the money was spent doing these things should be put directly into your retirement account.
Step two: Consider downsizing
If you’re still living in the home that you owned when you were raising your family but no longer need all that space, do some research to determine whether it would save you money in the long run to sell the house and either buy a smaller home or rent.
Step three: Set up weekly contributions
There’s nothing more rewarding than seeing the balance of your retirement accounts growing quickly. In order to ensure that you don’t spend what you’d intended to contribute to the retirement accounts and to get that immediate gratification, set up a weekly transfer from your checking account to your retirement account or long-term savings.
Step four: Max out that 401(k)
If you’re not yet getting the total employer match in your 401(k), you must correct this immediately. Do whatever it takes to change your budget in order to free up some cash to get your employer’s full matching contribution. Not doing so is like throwing away free money.
The more you have set aside for retirement, the better off you’ll be and the fewer sacrifices you’ll have to make in the future. Start stuffing your accounts now so you can grant yourself a better retirement than you otherwise would have.